average operating margin of alabama’s hospitals is 2.38 percent average operating margin for rural...
TRANSCRIPT
Average operating margin of Alabama’s hospitals is 2.38 percent
Average operating margin for rural hospitals is 1.1 percent
Almost half of all rural hospitals operate in the red
75% have seen increase in bad debt and charity care
BRIEF FINANCIAL STATUS
From 2011 to 2014, 5 rural hospitals closed in Alabama
WHAT HAPPENS WHEN A HOSPITAL CLOSES?
Loss of emergency services
LOSS OF OTHER HEALTH CARE
Hospitals provide needed support for local physicians, pharmacies, etc.
When a hospital closes, it can collapse the entire health care infrastructure.
Hospitals are often one of the largest employers.
Hospitals provide tremendous economic benefits.
Difficult to recruit industry without good health care.
LOSS OF ONE OF THE LARGEST EMPLOYERS
WHY ARE HOSPITALS CLOSING?
DEMOGRAPHICS OF A RURAL AREA
20 percent age 65 and older (13 percent in urban areas)
17 percent below the poverty level (14 percent in urban areas)
Chronic diseases tend to be worse in rural areas
LACK OF PATIENT VOLUME
Benefits of being smaller – neighbors caring for neighbors
Challenges due to lack of volume:
Low volume makes it difficult to cover expenses (skilled staff 24/7)
Thin margins make rural facilities more susceptible to market changes.
SHIFT TO OUTPATIENT CARE
56% of rural hospital revenue tied to outpatient (39% urban)
Technology has driven much of shift
Admission criteria also driving the outpatient increase:
Patients come to ED – too sick to go home, but may not meet criteria to stay
LOWER MEDICARE REIMBURSEMENT
Alabama has the lowest rural wage index in country = lower payments
Wages factored into payments
Budget neutral – wages go up in one part of the country, down in another
Lower payments, less money to pay staff = lower wage index!
20162012 2013 20152014 2017 2018
Reporting
VBP
Readmissions
HACs
Meaningful Use
1% 1.25% 1.5% 1.75% 2%
1% 2% 3% 3% 3%
2% 2%
1%
1%
3%
2%
9%
1%
1%1% 1%
Percent of Medicare Payments at Risk
MAJOR CHANGES IN MEDICAID
Program that provides care to low-income Alabamians
Rural hospitals serve a large Medicaid population, and Alabama is heavily dependent on federal dollars to fund Medicaid.
Tremendous reform underway as state moves toward regional managed care approach.
MORE ABOUT REFORM
Places risk at regional level, not state
Better continuity for patients and more efficient care
Opportunities and challenges for rural hospitals – will be innovating with slim margins for missteps
HIGH RATE OF UNINSURED
65% saw increase in ED visits
Many of the uninsured would be covered by Medicaid expansion, but state has opted out for now.
Federal government cutting supplemental payments for uninsured.
NOT EXPANDING MEDICAID MEANS
300,000 Alabamians won’t get health coverage.
Alabama loses $12 billion over 6 years, which could have a total economic impact of $28 billion.
Hospitals lose $167.8 billion nationwide.
Loss of up to 30,000 jobs
RURAL RELIEF BEING THREATENED
Rural hospitals have helped support struggling budgets with these programs:
Sole community provider
Medicare-dependent hospital
Low-volume payments
340B drug program
Critical access hospital program (CAH)
OTHER RURAL HOSPITAL CHALLENGES
Limited access to capital
Constant audits of care provided (RACs, MICs, ZPICs, CERTS)
Financial support for electronic health records decreasing; hospitals now in penalty phase.
Often difficult to recruit doctors and other health care personnel
CUTTING COSTS TO REMAIN VIABLE
Alabama has one of the lowest revenue-per-discharge rates in the country
50% of rural hospitals have cut salaries
33% have had to cut services
8% have liquidated assets
All rural hospitals constantly look for ways to cut additional expenses.
MANY RURAL HOSPITALS NO LONGER DELIVER BABIES
In 1980, 58 counties provided obstetrical services. Today, only 29.
There are only 17 counties in rural areas that deliver babies; that’s a 63% decrease!
50 – 60 miles
COST CUTTING CAN ONLY GO SO FAR
Rural hospitals have already made significant cost reductions
Rural hospitals continue to find creative ways to provide care to their communities
Rural hospitals need increased local support to survive